How the Aadhaar-based payment modes work

While Unified Payments Interface and BHIM are processes for peer-to-peer transactions using smartphones, the government is promoting Aadhaar-enabled payment systems for the non-smartphone savvy.Pratik Bhakta | ET Bureau | March 29, 2017, 11:05 IST

The government is planning to utilise the Aadhaar database to give shape to a digital future and utilise it for payments, and authentication of transactions is the key to its success. While Unified Payments Interface and BHIM (Bharat Interface for Money) are processes for peer-to-peer transactions using smartphones, the government is promoting Aadhaar-enabled payment systems for the non-smartphone savvy. As per sources it is planning to launch Aadhaar Pay on April 14. ET looks into the different forms of Aadhaar payment modes being developed by the government.

1. What are Aadhaar Enabled Payment Systems?Payments that can be done with the help of au thentication and identi fication through the Aadhaar database is referred to as the Aadhaar Enabled Payment Systems (AEPS). This is the new form of pay ment that is being pro moted by the govern ment to push for digital payments instead of cash transactions.

2. What are the major types of Aadhaar Enabled Payments?The first type of payment is Aadhaar Bridge Payment System which is meant for direct bene fit transfer and subsidy payments from the gov ernment to the benefi ciaries. The second is AEPS which is used at the level of the business correspondent or `bank mitras' where bank customers can use Aadhaar to access various services like cash withdrawal, account opening and fund transfer even without going to a bank branch.

The third is Aadhaar Pay wherein merchants can accept payments through Aadhaar identification of their customers.

3. Why do we need Aadhaar Enabled payments?These forms of payments are be ing promoted by the government specifically for the under privileged sections of the society and the rural poor who are not comfortable using cards or mobile wallets for payments.Instead of a mobile phone or a plastic card, in these forms of payments, the mode of authentication becomes the Aadhaar number and biometrics.

4. Who runs the systems?National Payments Corporation of India (NPCI) is the nodal authority for all Aadhaar-enabled payments in collaboration with banks. The payment company is trying to get as many banks to seed their customers' accounts with their Aadhaar number so that payments can flow smoothly .

5. How do the different forms of payments work?Aahdaar Bridge Payment (ABPS):

This is meant for recur ring payments done by the government to its customers for various subsidies as well as direct benefit transfer. Here the beneficiary is identified through an Aadhaar number, then NPCI manages an Aadhaar Mapper where the Aadhaar number is mapped to a specific bank account and the money flows to the connected bank account.

Aadhaar Enabled Payment (AEPS):

Here the customer has to approach a business correspondent (BC), use his Aadhaar number and biometrics which the BC shares with NPCI, which checks the ID with UIDAI (Unique Identification Authority of India) to confirm the customer's identity . It also checks the funds in the connected account and allows the transaction.

Aadhaar Pay:

This is for merchant payments where the merchant will download the merchant payments app of his bank, authenticate the customer through his biometrics and Aadhaar number and initiate a pull transaction.

The Telecom Regulatory Authority of India (Trai) pulled up Bharti Airtel and Vodafone Idea for warning subscribers of certain plans that their SIM cards would be deactivated if they do not recharge their pre-paid accounts though these subscribers had the minimum required balance.